Lessons Learned from Digital Microinsurance ‘Sprinters’
Oumar moved to Mozambique because he had heard stories of business opportunities that seemed more promising than in his home country of Mali. Within a few years, Oumar’s predictions panned out and he had grown from selling small items out of his home to building a larger storefront where he sold women’s clothing. But shortly after he opened the new women’s boutique and stocked it full of dresses, his neighbor accidently tipped over an oil lamp late at night. Oumar’s whole stock, along with his hopes, quickly went up in flames as he lost $14,000 worth of merchandise. Luckily for Oumar, he was able to turn to family and friends to help recapitalize and restock his business, and since has gone on to open a few other small stores.
Oumar’s story is not unique, but his ability to start over is. Many small business owners in developing countries don’t have support networks to tap into when tragedy strikes - leaving them empty handed and hopeless, forced to sell remaining assets or slip backwards into deeper poverty. Situations like Oumar’s show the ever-growing role insurance can play in not only providing funeral and basic health coverage, but also in protecting the economic livelihoods of millions across the developing world.
In Sub-Saharan Africa alone, mobile penetration is estimated to be greater than 60%. As mobile connectivity expands, it is becoming the primary way to reach low-income consumers in many markets. Because of this, mobile operators are now playing a growing role in helping to extend this valuable insurance coverage.
Digital microinsurance is defined as insurance products targeted to unserved and underserved populations that leverage digital mechanisms to improve outreach and delivery. In recent years, digital microinsurance and, more specifically, mobile microinsurance, has experienced tremendous growth with insurers, mobile operators, and technical service providers/intermediaries launching new products around the globe. However, of the 100 live mobile microinsurance services globally at the end of 2014, only a handful have reached more than a million low-income consumers, and done so on a financially sustainable basis, with the majority struggling to reach their full potential.
As part of our examination of the growth potential of digital microinsurance, funded by the Bill & Melinda Gates Foundation, we studied the digital microinsurance “sprinters” that have achieved exceptional scale in a short period to understand the lessons learned and identify some of the keys to success.
A captive, large market and strong brand: Models where a mobile operator lends its brand and strategic support to the initiative have been successful, as mobile operators typically have a large customer base and a strong brand, such as Telenor, the second largest mobile operator in Pakistan, which saw substantial take up of its recent Talkshawk insurance offering. Research during an initiative we led in Ghana showed that 70% of those surveyed would prefer to buy insurance from a mobile operator as opposed to an insurer.
Simplified product design and processes: With simplified processes for registration, administration and claims processing, customers can easily engage with digital microinsurance products. In many cases, customers can enroll via SMS or USSD - without having to travel to an insurance agent. Customers can also be auto-enrolled based on existing data that mobile operators have to collect in certain markets when customers register for SIM cards or mobile money accounts.
Focus on both quality and quantity: Scale is important, but providing quality insurance products ensures growth. This is especially true in markets that are still building an insurance culture, like many African, Southeast Asian, and Latin American countries. Quality products are those that appropriately address the needs of consumers, charge affordable premiums, provide easy access, simplify product experience, provide consumer education, and build a culture of paying claims quickly, easily and publicly.
Offering multiple types of insurance cover to customers: Product variety attracts a wider array of customers. One example of this is the collaboration between Tigo, a mobile operator, and Bima, a mobile insurance provider, which has expanded insurance offerings in Ghana and Tanzania from simple life products to include additional hospital cash insurance.
Build with loyalty models, then upsell with suitable payment mechanisms: Loyalty models can reach immediate scale and act as a market maker by auto-enrolling segments of customers who achieve certain airtime or mobile money spending thresholds, as seen by offerings in Zimbabwe, Zambia and a number of other markets. When shifting from free to paid insurance models, the payment mechanism should align with the market. Mobile money and debit orders often only reach a small proportion of the market, and exclusive use of these mechanisms can limit uptake and lead to higher lapse rates. Airtime is pervasive across most markets, and leveraging it to collect premium payments can help address some issues, although costs associated with airtime can often be significantly higher than mobile money. The trade-offs must be considered when designing products.
Mix digital sales with high-touch sales: Utilization of multiple channels (e.g. SMS, USSD, agents, call centers) suited to target customers provides greater access and drives sales of insurance products. Mobile channels can help drive uptake but this often needs to be combined with high-touch (human) models as well.
Enabling regulatory environment: Despite the best efforts by insurers and mobile operators, regulation in a market can often make or break a mobile insurance initiative. Regulators must ensure they provide space for innovation while also protecting the market.
By taking into account the seven lessons described above, mobile operators, insurers, regulators, and other players can more successfully clear the hurdles these products face - and insurance can continue to find its place among ever-digitizing emerging consumers.
In the case of Oumar, we first met him to hear about his resiliency after the fire and understand his situation in order to conceptualize insurance products for other SMEs in Mozambique. Only days after interviewing him, Oumar shared that he had again lost many possessions - this time at home - when robbers broke in at night. His despair, however, was tempered through his resilient tone: “I hope an insurance product comes quickly,” he commented. “Risks don’t stop once you’ve experienced tragedy.”
Most banks in my country do not establish ln rural area. 7 million people Of Papua New Guinea are leaving under $0.70 per
day. We are in desperate need for finance for our day to day living.